This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the top of any article.

Bronze AHA Winner in Liquidity Management

Managing All FX Transactions In House: AT&T

By bringing the outsourced servicing of its Consolidated State Service in house, AT&T eliminated a significant cost and improved customer service. The project reduced foreign currency (FX) transactions from thousands to a couple dozen a month, says Tom Clemens, director of financial analysis. The solution uses a single U.K. international bank account number (IBAN) to consolidate FX payments, and a pooling structure to hold the currencies. A zero-balance account seamlessly drains the notional U.S. dollar pool daily from London to New York, Clemens explains.

The CSS has long been popular with customers, who can pay for global telecommunication services with a single payment in the currency of their choice. The funds are received into the IBAN account and redirected to subaccounts denominated in 12 currencies. The subaccounts are notionally pooled, with the equivalent U.S. dollar amount swept into a concentration account to be used by treasury to pay down commercial paper or for other corporate purposes. Once a month, AT&T uses funds from the subaccounts to pay its local subsidiaries in their respective operating currencies.

Historically, the third party hosting this service used FX transactions whenever it passed a customer payment to an AT&T sub, costs that AT&T ultimately paid. AT&T cash was also tied up in the third party's accounts. Now AT&T uses the aggregated receipts from all its customers in multiple currencies to make a single payment every month to each of its international subsidiaries in their operating currency, significantly reducing FX transactions. In addition, funds are now accessible, Clemens says.

The project allowed AT&T to "manage and control the receipts and FX risk and reduce operating costs, while getting efficient, cost-effective movement of funds without creating an operating burden on our FX and cash management teams," says Elaine Lou, director of financial analysis.

In taking over the service, AT&T enhanced billing flexibility by allowing a netting arrangement that applied a customer's credit balance in one country and currency against an outstanding balance in another country and currency, something the third party was unable to do. "Being in control of the process and the funds makes a real difference," Clemens says. "We have a clarity we never had before."

Treasury & Risk

Treasury & Risk is an online publication and robust website designed to meet the information needs of finance, treasury, and risk management professionals. Our editorial content, delivered through multiple interactive channels, mixes strategic insights from thought leaders with in-depth analysis of best practices, original research projects, and case studies with corporate innovators.